9:51 AM Apr 7, 1997
SOUTH SHOULD SEEK RULE CHANGES IN TRIPS,TRIMS
New York 3 Apr (TWN) -- Some of the rules and disciplines of the WTO on intellectual property rights (IPRs) and on investment measures are detrimental to imperatives of sustainable development and the South countries must act together and get changes in these rules, according to Argentine academic and a leading expert on IPRs, Mr. Carlos Correa. Correa, a former Argentine Vice-Minister on Science and Technology, and negotiator on IPR questions at the WIPO and the Uruguay Round, told the G77-TWN Round Table on "Globalization and Sustainable Development" that the developing countries had been persuaded to accept the higher global norms and protection for IPRs and some disciplines on investment, on the premise that this will promote foreign direct investment (FDI) and transfer of technology (TOT) and end US unilateralism. None of these were materializing, and a number of studies (including some generated within the Bretton Woods Institutions) that the costs of implementation and welfare losses to the developing countries would be high, and that far from promoting TOT and FDI, these rules were impeding them. The combined effect of some TRIPs rules and some TRIMs rules were coming in the way of access to environmentally sound technologies (ESTs) needed by the South countries for protection of the environment and sustainable development and implementation of Agenda 21, Correa said. The TRIPs Agreement was presented by the developed countries as a necessary condition to promote innovation and to stimulate TOT and FDI, and that the public of both developed and developing countries would benefit. "But it remains unproven, that a reinforced and expanded IPR protection worldwide shall increase the flows of technology and capital to developing countries," Correa said. Studies on relationship between FDI and IPRs are scant and inconclusive, but the few show that: * there is no definite reason to expect increase in FDI as a result of increased patent protection in developing countries; * the US support for enhanced copyright protection was not intended for protecting investments, but propping up profits of one of the strongest export sectors of the US; * innovative companies in the North, in the post-Uruguay Round scenario, are likely to opt to directly selling goods and services incorporating the innovations, rather than transfer the technology through FDI, and thus result in more exports by developed countries and less technology transfer to developing countries; * there is a strong correlation between increased exports from the US and strengthened IPRs; and * new standards on IPRs and increased disciplines on TRIMs constrain the ability of host countries to benefit from FDI. Correa said, there is also growing evidence that under the new regime, innovative firms are reluctant to transfer technology in an unpackaged form under licenses and contractual arrangements. The developments in information technology is increasing the advantages of TNCs, by facilitating and cheapening the costs of intra-firm communication, coordination and control. The recent policy changes in developing countries in favour of FDI tend to reduce the costs of internationalization, while fear of creating competitors on a global scale deters TOT. And when in fact technology is transferred, the improved bargaining position of the rights holder is leading to higher royalty rates. Access to scientific knowledge is also becoming problematic, with increasing pressures on academic institutions to limit free dissemination of research results and constraining traditional openness of university laboratories, where most basic research is done in the North. While Chapter 34 of Agenda 21 recognized the need of favourable access to and transfer of ESTs to developing countries on concessional and preferential terms, and sets out in detail, actions to be undertaken to support and promote access to and use of ESTs, little has been done to implement them. TRIPs has enabled private parties in fact, to control use and transfer of ESTs. The high standards of IPR protection for patents and trade secrets has enabled the title holders to retain these technologies and charge high royalties for access. A good example has been India's experience in getting access to HFC 134A, a technology covered by patents and considered the best available substitute for CFCs, which are to be phased out under the Montreal Protocol. A consortium of Indian producers using CFCs, which have sought access to HFC 134A on commercial terms have been denied licenses and access by the patent holders who want majority equity control and ownership of the Indian company. The paradox of ESTs is that Multilateral Environmental Agreements want certain technologies and products to be phased out, but the ESTs remain under the monopolistic power of patent holders. National level standards prohibit imports of goods not complying with certain environmental requirements, but lack of access to ESTs creates additional market access barriers to developing countries. Correa said that the TRIPs agreement had some provisions to deal with environment concerns, including possible exclusion from patentability of inventions causing serious prejudice to environment, possible exclusion from patentability of plants and animals, and the right to confer compulsory licenses on grounds determined by national law. These were some important provisions that ought to be used. It was unfortunate, Correa added, that the WTO and the WIPO in providing technical assistance to developing countries to implement the TRIPs accord, were not setting out objectively and clearly to the developing countries the various options, but providing them with a highly restrictive interpretation favoured by the United States, and thus reducing even the limited options available to the South Countries. One of the important trade-offs sought by developing countries during the TRIPs negotiations, Correa said, was establishment of a multilateral mechanism for dispute settlement that would avoid unilateral actions by developed countries. This aim is set out in the preamble of TRIPs. But the expectation that TRIPs would be an instrument to eliminate tensions and institutionalize conflicts have been undermined by actions against developing countries to amend IPR laws before the expiration of the transitional periods allowed to them. Citing Argentina's own experience, and the repeated US threats against Argentina and the recent withdrawal by US of GSP benefits to Argentina, Correa said, the GATT decisions on GSP precluded the countries providing GSP to extract concessions from intended beneficiaries. There have also been similar tensions in relations between the US and several Latin American countries in this whole area of IPRs. US legislation has recently reaffirmed that the US was entitled to invoke and use trade sanctions even if the target countries were in fact complying with the TRIPs accord. While the US was going about threatening countries to secure their compliance with TRIPs, and often to forego the transitional periods allowed, the US itself had not complied with its obligations. For e.g., the US legislation was inconsistent with its TRIPs obligations with regard to compulsory licenses for government use, in not recognizing the moral rights under copyright and in protection of geographical indications. While there are some divergences in interpretation of the TRIPs rules and these may create problems, developing countries were also facing some turbulence due to unilateral actions outside the TRIPs and WTO framework. They have to absorb also, the direct and indirect costs of implementation of new rules with little support from the developed countries. The economic and social implications and costs of the new WTO rules were never considered to be a relevant issue by the governments of developed countries or their industrial lobbies. In this situation, developing countries need to follow twin-strategies. On the one hand, they must take full advantage of the options available under TRIPs and their laws should only reflect the minimum standards required. They must have laws to issue compulsory licenses without limiting the grounds. An effective system for compulsory licenses must be set in place, including for health reasons or where a license is unreasonably refused to a local firm or where title-holders are engaged in anti-competitive practices. Developing countries should also fully utilize the principle of international exhaustion of rights and allow parallel imports i.e. imports of patented products legitimately put on the market abroad. They should strictly apply the three criteria for patentability -- novelty, inventiveness and industrial applications. Correa also stressed the relationship between IPRs and legislation on competition and said competition laws should be rigorously applied to prevent or remedy abuses of IPRs. Developing countries should develop their own sui generis systems for protection of plant varieties, incorporating provisions for recognition of knowledge of traditional and indigenous communities and "farmers' rights". While developing countries could undertake a number of measures within the existing rules, for other measures to protect the environment and promote sustainable development, they need to secure changes in the existing framework of rules. Amendments should be proposed and the rules changed so as to obtain: * clear exclusion from patentability of all substances existing in nature; * strengthening the compulsory licensing system, including when patents are not worked and also for environmental reasons; * sui generis protection for knowledge of local and indigenous communities; and * revision of TRIPs accord, e.g. in respect of duration so as to effectively promote transfer of ESTs.